Treasurer Andrew Constance welcomed a Court of Appeal decision on Tuesday which overturned the Industrial Relations Commission finding that excluded superannuation from the NSW Government’s 2.5 per cent cap on salary increases.

“This is a significant decision which avoids an $865 million hit to the NSW Budget and a potential loss of around 8,000 public sector jobs,” Mr Constance said.

“Our wages policy is completely consistent with the historical treatment of superannuation at both Federal and State levels, and today’s Court of Appeal decision backs that position.”

Salary increases that the government has already awarded to public servants from July last year include superannuation entitlements as part of the 2.5 per cent wages cap. Police officers will receive an additional $655 subsidy for their superannuation insurance premiums, costing $25.7 million over three years.

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Opposition spokesman for Industrial Relations, Adam Searle, said public sector employees would receive a pay increase of 2.27 per cent instead of the full 2.5 per cent provided for in the IRC decision.

“With inflation now running at 2.9 per cent, this government is cutting the wages of public sector workers by giving them pay increases well below the CPI and making them pay their own superannuation increase,” he said.

The president of the NSW Teachers’ Federation, Maurie Mulheron, said the Court of Appeal decision on Tuesday meant a wages cut for public servants including 45,000 teachers. He said his union would campaign against the Coalition government in the lead up to next year’s state election if it refuses to increase the 2.5 per cent cap.

Public Service Association director of policy and strategy, Anthony D’Adam, said the Court of Appeal decision was ‘‘a kick in the guts” for public sector workers. He said the Association is seeking legal advice on whether to seek a High Court appeal.

“The decision will lead to wage increases that are less than the cost of living for the forseeable future,” he said.

‘‘Public sector wages will become uncompetitive with the private sector which will lead to the loss of skills and expertise.’’

NSW Greens MP David Shoebridge said the decision overturns the orders of the Industrial Relations Commission that awarded public sector employees a 2.5% increase in their award payments that they were to receive in addition to the 0.25% increase in their superannuation guarantee payment.

“Working people need a decent wage increase now to meet the everyday costs of living, not just a marginal increase in their superannuation that can’t touch till they are 70,” he said.